News Release

Wall Street Criminality: Origin of State Crises

February 28, 2011

Last night Charles Ferguson, director of “Inside Job” (about Wall Street’s wrongdoing), upon receiving the Oscar for best documentary, said: “Forgive me, I must start by pointing out that three years after our horrific financial crisis caused by financial fraud, not a single financial executive has gone to jail, and that’s wrong.” See video at 11:50.

WILLIAM BLACKBlack is an associate professor of economics and law at the University oof Missouri, Kansas City and the author of The Best Way to Rob a Bank Is to Own One. He said today: “This is the third financial crisis in 25 years driven by an epidemic of fraud led by the CEOs of seemingly legitimate firms. In the S&L debacle, prompt reregulation, intense supervision over the ferocious opposition of powerful politicians, and courageous prosecutions led to the felony convictions of over 1,000 ‘major’ S&L executives and their cronies. In the current crisis, not a single senior executive of the major frauds that drove the crisis has been convicted. The story is partially resources (we have one-sixth the FBI agents assigned to this crisis as were assigned to the far smaller S&L crisis), but it far more the collapse of regulation. Regulators must make the criminal referrals and serve as the ‘Sherpas’ if there are to be successful prosecutions of thousands of elite, sophisticated white-collar crimes. The regulators have to do the ‘heavy lifting’ (conducting the detailed investigations) and serve as the ‘guides’ because the FBI cannot possibly have the industry expertise. S&L regulators made over 10,000 criminal referrals — the Office of the Comptroller of the Currency and the Office of Thrift Supervision made none during the current crisis. Without support from the regulators, the FBI formed a ‘partnership’ with the Mortgage Bankers Association — the trade association of the ‘perps.’ The MBA created a definition of mortgage fraud that defined out of existence fraud by mortgage bankers — the leading cause of fraud.

“The mortgage fraud epidemic, roughly a million frauds annually in the peak years, caused the financial crisis and the Great Recession. The Great Recession, in turn, caused the federal deficit to grow rapidly and caused a financial crisis in nearly every state and locality. The fruits of that crisis are being seen now in the political struggles in Wisconsin.”

RUSSELL MOKHIBER
Mokhiber is editor of Corporate Crime Reporter. He said today: “Why have there been no convictions of those Wall Street corporations and executives responsible for the phony financial boom? Over the past 25 years, the corporate lobbies have watered down the corporate criminal justice system and starved the prosecutorial agencies. Young prosecutors dare not overstep their bounds — for fear of jeopardizing the cash prize at the end of the rainbow — partnership in the big corporate defense law firms after they leave public service. The result — if there are criminal prosecutions, they now end in deferred or non-prosecution agreements — instead of guilty pleas. If executives are criminally prosecuted, they tend to be low level executives. Often — as in the case of the Wall Street collapse — the easy out is to seek civil fines and restitution.” Mokhiber’s books include Corporate Predators: The Hunt for Mega-Profits and the Attack on Democracy.